Rashi Peripherals aims to maintain 25% CAGR in 2018

Fast-growing Indian distributor Rashi Peripherals remains upbeat about the market’s growth potential in the years ahead. Among the top five distribution companies in India, Rashi Peripherals currently employs over 750 people across 50 locations pan-India, with sales currently standing at approximately US$600m per annum.

In an exclusive interview at the recent DISTREE APAC channel event in Singapore, Rajesh Goenka, VP sales and marketing at Rashi Peripherals, said: “We aim to maintain a CAGR of 25% in fiscal year 2018 as the Indian market continues to develop. Rashi Peripherals has strong footprints in the Indian IT distribution business for the last 28 years.”

In the next three years Rashi Peripherals is expecting double digit annual growth in the IT market, coupled with a smartphone and mobile market growing at between 20% and 30% each year. New product category opportunities are emerging as more of the Indian population takes ownership of devices.

“We’re seeing huge potential for new product categories in the Indian market such as wireless chargers from Belkin. The opportunity is immense,” said Goenka.

In recent years, the Indian market has adjusted to the growth and development of e-commerce websites such as Amazon and Flipkart.

“We have had companies in India that were prepared to lose money to gain online market share,” said Goenka. “As a distributor, we must be flexible and open in our approach, but also make sure we are following the policies of the vendors we represent. Some vendors want to focus only on channel business, only on retail or only online – or a mixture of all three.”

“Online retail has already had its impact in India and now we’re seeing the major players looking to reduce their burn rate. There is an impact on pricing stability. Some vendors are now creating online only SKUs. The worst is over in terms of the disruptive impact from online,” he added.

“Delivery lead time is still a problem for online players – it can take between 3-5 days. Local retailers have advantage over them,” Goenka explained.

DIY market

One area of strength for Rashi Peripherals is the DIY market, or PC local assembly market as it also referred to. Many of the components used in the DIY business are sold through sub-distributors in India.

“The DIY market has been through a consolidation phase. Three years ago, the TAM for DIY was around 4 million PCs and it is now at about 2 million units per annum,” explained Goenka.

“Our belief is that the DIY market has now stabilised at this level and the ASP has actually been going up as customers demand better motherboards and better memory. With some component prices rising, this is leading to increased revenues in the DIY sector,” Goenka added.

“Because of the decline in DIY TAM, some distributors have defocused on this segment. Rashi Peripherals has made a clear decision to invest in and focus on this market and we believe that 50% of DIY systems now include products sourced from Rashi Peripherals,” he added.

“The 2 million units per annum also has potential to rise because of GST implementation in India. This is driving demand from small shops and businesses that need a desktop now to manage their accounts. They prefer a desktop to a laptop because of its longer lifecycle,” Goenka continued.

Rashi Peripherals also provides extensive retail channel reach for the brands it represents in India.

“We are dealing with over 8000 retailers in India – these could be with just one or two stores, not big chains. But we are selling to and giving credit to this significant channel customer base,” said Goenka.

In some product categories, the use of manufacturing facilities within India is starting to shape the vendor landscape.

“Between 60% and 70% of smartphones sold in India are now manufactured in India,” said Goenka. “There is a 10% price advantage for smartphones made locally. We are not seeing local manufacturing in the IT space because there is no specific price advantage and the ecosystem to drive this local manufacturing does not yet exist.”

Target 2000

Rashi Peripherals mission is to make IT and smartphone products available across all of the 2000 towns and cities in India.

“Today, we have probably reached about 800 of these towns and cities so we are working hard to further develop our distribution. We already have 50 branch offices across India – more than some global distributors operating in India,” said Goenka. “We also want to maintain a balanced business and a balanced portfolio split evenly between components, mobiles, peripherals and branded PCs.”

He added: “We are working on developing an enterprise business unit, which will offer solutions and services for enterprise customers. We believe that dealing directly with large enterprises is a way to introduce more high-end products into the Indian market and benefit as usage moves down to a wider base of users. For example, we launched an enterprise 1TB SSD by selling it into a datacentre customer and have then seen these products start to make an impact in retail and online.”

Goenka believes that the role of a distributor remains vital in helping vendors and brands make an impression in the Indian market and build sufficient channel reach.

“Vendors wanting to launch in India can use national distributors to access local markets and get a true understanding of market conditions and consumer needs,” he explained. “India has about 10 truly national distributors and every year or so you may see one of the ten drop out, but then someone emerges to take their place.”

“There is not much consolidation pressure in the Indian market at present because the market is growing, and this is expected to continue for the next few years. I saw a presentation [at DISTREE APAC] that looked at some of the key business metrics for global distributors in terms of inventory terms and margins. The metrics in our business is different now, but it was interesting to see, because we know that these are the business realities we will face in the future as the Indian distribution channel matures,” he commented.

Smartphone usage and the availability of data connectivity is driving the development of the Indian market, according to Goenka.

“Everything related to smartphones and the internet is growing fast. We’re already seeing app-based buying and the PC cycle has been skipped with many Indians going straight to smartphone,” he concluded.